Feds Order Credit Card Company Cooperation to Curb Tax Evasion

by AccountingWeb on Mar 26 2002printer friendly

Offshore tax havens have always been a sanctuary for those wishing to take advantage of favorable banking secrecy laws.

But now, the Internal Revenue Service is teaming up with the heavy hand of the judicial system to order[1] Visa International, MasterCard and American Express to turn over private records on hundreds of thousands of offshore accounts, in hopes of finding possible tax evaders and bringing them to justice.

A federal judge ordered Visa International to turn over records linked to offshore accounts in more than 30 countries. American Express has also been asked to provide passport numbers and drivers license information for US customers holding cards from banks in popular havens like the Cayman Islands, Antigua and Barbuda. And Mastercard has already turned over millions of records in response to a court summons.

The theory is that those who are looking to evade taxes may deposit unreported income in an offshore bank and then set up a credit card account from those banks to pay for goods and draw off the funds while living in the U.S. Credit card holders issued by offshore banks are required to report them, but the IRS estimates that fewer than 10% do.

"Simply put, the guarantee of secrecy associated with offshore banking is evaporating," said IRS commissioner Charles Rossotti. "If people use these illegal offshore methods to hide their income, we will find out who they are," he said.